REITS - Buying 1 - 2 weeks before going ex-dividend Message Board

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Strategies & Market Trends : REITS - Buying 1 - 2 weeks before going ex-dividend

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To: Larry S. who wrote (2268)	2/27/2002 11:30:25 PM
From: Richard Barron	Read Replies (1) of 2561

Larry, If they are lucky, short term they may be right. I doubt it. Historically, REITs are fairly priced, with AFFO multiples around 8-12. FFO multiples used to be around 10-13 10-15 years ago, and FFO was inflated by 3-5% compared to today as more amortizations were added back in. FFO is definitely more conservative. Also, REITs are paying out lower percentages of AFFO and FFO in dividends, so the dividends have more room. I agree that the FFO growth should be the slowest since 1988-1991, but I doubt if real estate values are going to drop 20-40% this time. In addition, interest rates are favorable, and a 10% real estate return is probably much higher than the S&P 5-7% earnings growth that Warren Buffett predicts for this decade. So... I am not worried too much about the article. I agree completely that the highly leveraged REITs should be avoided. The bit about REITs normally trading at a 20% discount to NAV is probably ridiculous. I'll be backing up the truck the next time the quality REITs are trading at a 20% discount to NAV. Richard

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